LOS ANGELES:- The US Consumer Financial Protection Bureau, (CFPB) has issued new guidelines requiring banks and financial institutions to base their lending decisions on immigration status, a move that is set to add legal and practical complexity for lenders.

According to the CFPB, non-citizen applicants are at risk of losing their jobs or being deported because of their immigration status. In such cases, banks must carefully analyze this, as they are at risk of not being able to repay their mortgage or credit card debt. Under the Truth in Lending Act, lenders are legally required to objectively assess a customer’s ability to repay their loan.

The policy is due to be published in the Federal Register on June 8. Although the agency calls it “non-binding,” it is expected to be a challenge for banks, who are under pressure to enforce strict immigration status checks while upholding anti-discrimination laws that prohibit discrimination based on national origin.

The CFPB recently introduced the policy as part of an executive order issued by the Trump administration to regulators to monitor immigration violations in the financial system. Previously, in 2023, during the Biden administration, the CFPB and the Justice Department ruled that denying loans based on immigration status was discriminatory and unlawful, a ruling that has now been reversed.

Civil rights groups have strongly criticized the policy, claiming it deprives hard-working immigrants of banking services.